A Market Mechanism for Sustainable and Efficient Resource Use Under Uncertainty

27 Pages Posted: 19 Jul 2017

See all articles by Martin F. Quaas

Martin F. Quaas

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Ralph Winkler

University of Bern - Department of Economics; University of Bern - Oeschger Centre for Climate Change Research

Date Written: June 21, 2017

Abstract

Sustainability and efficiency are potentially conflicting social objectives in natural resource management. We propose a market mechanism to allocate use rights over a stochastic resource to private managers. The mechanism endogenously determines the maximal tenure length guaranteeing that the sustainability goal is obeyed for sure over the entire period. In addition, the mechanism achieves efficiency, i.e. it maximizes the expected present value of resource rents that accrue to society. Potential applications include improved fishing agreements between developing countries and distant-water fishing fleets.

Keywords: auctioning-refunding-mechanism, efficient resource allocation, renewable resources, stochastic resource dynamics, sustainability

JEL Classification: Q200, D440, D820

Suggested Citation

Quaas, Martin F. and Winkler, Ralph, A Market Mechanism for Sustainable and Efficient Resource Use Under Uncertainty (June 21, 2017). CESifo Working Paper Series No. 6524. Available at SSRN: https://ssrn.com/abstract=3003862

Martin F. Quaas

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig ( email )

Deutscher Platz 5e
Leipzig, 04103
Germany

HOME PAGE: http://www.idiv.de/bioecon

Ralph Winkler (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, 3001
Switzerland
+41 31 631 4508 (Phone)

HOME PAGE: http://www.ralph-winkler.de

University of Bern - Oeschger Centre for Climate Change Research ( email )

Zähringerstrasse 25
Bern, 3012
Switzerland

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